On October 17, 2019, FERC denied rehearing of its order denying a complaint filed by CXA La Paloma, LLC (“La Paloma”), which argued that the California Independent System Operator Corporation’s (“CAISO”) resource adequacy regime had become unjust and unreasonable. Stakeholders asserted, among other things, that FERC ignored certain evidence suggesting inadequate capacity prices would lead to near-term reliability problems; FERC disagreed, restating the evidence and arguments initially presented in the complaint, and explaining that based on the evidence presented it did not find CAISO’s resource adequacy regime unjust and unreasonable. In its order denying rehearing, FERC weighed in (again) on low capacity prices and reliability concerns in California, as well as the scope of its section 206 authority.     
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On October 8, 2019, FERC accepted ISO New England Inc.’s (“ISO-NE”) public and private versions of a filing containing the de-list bids (“De-List Bids”) and substation auction test prices (“Test Prices”) for the fourteenth Forward Capacity Auction (“FCA 14”), to be held in February 2020 and to become effective August 27, 2019. In the process, FERC also granted ISO-NE’s requested waiver of FERC’s regulations requiring parties requesting privileged treatment of their filings to provide a copy of such non-public documents to intervenors who execute a protective agreement.
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On October 2, 2019, revisions to the Southwest Power Pool, Inc. (“SPP”) Membership Agreement went into effect without an order, as FERC lacked a quorum to rule on SPP’s proposal due to Commissioner Richard Glick’s ongoing recusal in certain proceedings at FERC (see October 3, 2019 edition of the WER). SPP’s filing on August 2, 2019 proposed new definitions for the terms Load Serving Entity (“LSE”) and non-LSE to its Membership Agreement. A joint statement from Chairman Neil Chatterjee and Bernard McNamee indicated that they would have accepted the revisions as requested.   

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On September 30, 2019, FERC accepted in part and rejected in part, the California Independent System Operator’s (“CAISO”) July 2, 2019 proposed revisions (“July 2 Filing”)  to its open access transmission tariff (“Tariff”) to include three unrelated mitigation measures designed to facilitate the participation of fast-ramping hydroelectric resources in the western energy imbalance market (“EIM”). FERC accepted two aspects of CAISO’s proposal related to the mitigation timing (the “Mitigation Timing” proposal and a hydro default energy bid (“DEB”) proposal, referred to as the “Hydro DEB” proposal), but rejected CAISO’s proposal to allow an EIM entity balancing authority area (“BAA”) in the real-time market to limit dispatch of incremental net exports under certain conditions (the “Net Export Limit” proposal).
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On September 27, 2019, FERC approved CAISO tariff revisions to its voluntary Capacity Procurement Mechanism (“CPM”) and mandatory Reliability-Must-Run (“RMR”) framework such that all backstop procurement from resources that would otherwise retire or mothball will be addressed through CAISO’s RMR provisions. While FERC has traditionally considered RMR contracts as measures of last resort, FERC found it just and reasonable for CAISO to expand its use of such contracts to address evolving operational needs due, in part, to the increased penetration of variable energy resources in California. Commissioner Glick partially dissented, arguing that the approved tariff changes essentially provide CAISO “unchecked authority” to enter into out-of-market contracts to meet its resource adequacy needs.
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On September 16, 2019, FERC accepted revisions to the PJM Interconnection, L.L.C. (“PJM”) tariff that: (1) establish a process by which existing capacity sellers can request removal of their capacity resource’s status; and (2) revise the process for must-offer exceptions due to an existing seller’s physical inability to meet its capacity requirements. The changes clarify how existing capacity resources may, under certain circumstances, effectively elect to “opt out” of PJM’s annual capacity auctions (termed Based Residual Auctions, or “BRAs”).
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On September 25, 2019, FERC issued a notice stating that the results of the ISO New England, Inc. (“ISO-NE”) thirteenth Forward Capacity Auction (“FCA”) went into effect as of June 28, 2019 by operation of law—i .e., without FERC action. FCA 13 went into effect by operation of law due to a lack of quorum in the proceeding in which ISO-NE submitted the auction results and requested FERC approval of the auction as being conducted in accordance with ISO-NE’s Tariff and producing just and reasonable rates. Under Section 205 of the Federal Power Act, FERC has 60 days to act on a proposed rate filing; if FERC takes no action in that 60-day period—a very rare occurrence—then the rate becomes effective automatically. On September 27, 2019, Commissioner Richard Glick issued a statement indicating that he did not participate in the proceeding due to an ethics pledge that precludes him from working on any matters in which his former employer, Avangrid Inc., or any of its affiliates or subsidiaries is a party until November 29, 2019. Commissioner Glick explained that he could not participate because Vineyard Wind LLC, a joint venture between Avangrid Renewables, LLC and Copenhagen Infrastructure Partners, was a party to the proceeding.
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On August 30, 2019, FERC instituted a section 206 proceeding to require PJM Interconnection, L.L.C. (“PJM”) to revise its Amended and Restated Operating Agreement (the “PJM Operating Agreement”) in light of a recent reversal from the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”).  In the new section 206 proceeding, FERC is requiring PJM to revise the PJM Operating Agreement to include projects needed solely to address Form No. 715 local planning criteria in PJM’s competitive proposal process, or to show cause why such revisions are not required.  In a concurrent order on remand, FERC also rejected revisions to the PJM Transmission Owner Tariff that had previously been amended to clarify that 100 percent of the costs for projects that are included in the PJM Regional Transmission Expansion Plan (“RTEP”) solely to address individual transmission owner Form No. 715 local planning criteria should be allocated to the transmission owner’s transmission zone.  FERC expects to issue a final order on the section 206 proceeding within 180 days.
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On August 27, 2019, FERC affirmed its earlier rejection of PJM Interconnection, L.L.C.’s (“PJM’s”) proposal to, in certain circumstances, exempt incumbent transmission owners from executing a Designated Entity Agreement pursuant to the Regional Transmission Expansion Plan (“RTEP”) process set forth in Schedule 6 of its Operating Agreement, but not to exempt other transmission developers from this requirement (“August 27 Order”).  The August 27 Order on rehearing and compliance affirmed FERC’s conclusion in a July 2018 order that incumbent and non-incumbent transmission owners are similarly situated, and that incumbent transmission owners would be given a competitive advantage in PJM’s RTEP process if they were exempted from executing the Designated Entity Agreement.  The August 27 Order also accepted revisions to PJM’s Operating Agreement to provide a 60-day window for an incumbent transmission developer that PJM identified as a Designated Entity in its RTEP process to accept the designation.
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On July 25, 2019, FERC issued an order directing PJM Interconnection, L.L.C. (“PJM”) “not to conduct the 2019 BRA” (Base Residual Auction) in August (“July 2019 Order”).  The 2019 BRA, which will procure capacity for the 2022-2023 Delivery Year, was already delayed from May to August while FERC considered how to apply the PJM Minimum Offer Price Rule (“MOPR”) to resources which receive out-of-market support, including Zero Emissions Credits (“ZECs”) and Renewable Energy Credits (“RECs”).  If the MOPR were applied to units receiving ZECs, RECs, or other out-of-market support, it is expected capacity market prices would be higher in some regions, and market revenues may be lower for some generators receiving ZECs or RECs or their off-takers.
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